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3. Assume the following information: Spot rate of Canadian dollar 0.43500 90-day forward rate of 0.4345 Canadian dollar 90-day Canadian interest rate 4% 90-day UK

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3. Assume the following information: Spot rate of Canadian dollar 0.43500 90-day forward rate of 0.4345 Canadian dollar 90-day Canadian interest rate 4% 90-day UK interest rate 2.5% What would be the yield (percentage return) to a UK investor who used covered interest arbitrage? (Assume the investor invests 1,000,000.) a. 3.88% b. 2.7% c.-2.7% d. -0.42%

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